Capping a tumultuous year for the music-streaming pioneer, Pandora is losing founder and CEO Tim Westergren as well as its president and chief marketing officer. The departures signal a larger influence of SiriusXM, which recently bought a 19 percent stake in the company, and leaves the money-losing company’s fate uncertain.
Westergren cofounded Pandora and has served as an executive and board member since 2000. He returned to the role of CEO in March 2016 amid concern that his predecessor, Brian McAndrews, was losing ground against rivals such as Spotify and Apple Music. At the time, Michael Herring also joined as CFO, while Nicholas Bartle came on as chief marketing officer in October.
Now all three are gone. Pandora said that Naveen Chopra, a former TiVo executive who joined Pandora as CFO in February, will serve as interim CEO while the company conducts a search for a permanent CEO. During his tenure, Westergren made aggressive strategic moves to strengthen Pandora’s operations, including new licensing agreements with music labels and a $10-a-month premium service aimed at competing with Spotify and Apple Music.
“I came back to the CEO role last year to drive transformation across the business. We accomplished far more than we anticipated,” Westergren said in a statement. “With these in place, plus a strengthened balance sheet, I believe Pandora is perfectly poised for its next chapter.”
The moves Westergren made, while necessary, may have come too late. Pandora’s stock fell as low as $6.87 last week, its lowest level since the company went public in 2011. Pandora burned through $182 million in cash last year and another $36 million in the first quarter of 2017. Were that burn rate to continue, the company risks depleting the $171 million in cash remaining in its coffers.
Last month, Pandora received a lifeline in the form of a $480 million investment from SiriusXM in exchange for a 19 percent stake in the company. At the same time, Pandora also sold Ticketfly to Eventbrite for $200 million, well below the $335 million it paid for the ticket-distribution service in 2015.
In announcing the SiriusXM investment, Westergren tweeted, “A big day for us at Pandora. The start of our next chapter.” That new chapter won’t include Westergren, and it begins with three key management roles empty and no long-term successors in sight. Westergren’s resignation was first reported by Recode on Sunday.
Instead, Pandora’s future is likely to be determined by SiriusXM as well as Liberty Media, which owns 65 percent of the satellite radio company. SiriusXM controls three of Pandora’s eight board seats. One of those three new members will become Pandora’s new chairman, likely Liberty Media CEO Greg Maffei.
In announcing today’s departures, a Pandora statement described it as “driven by a focus on optimizing shareholder value.” That suggests Pandora may shift its focus to improving its financial performance, even if it means less investments in campaigns that could add to subscriber growth.
The news has left Pandora’s stock volatile as investors grappled with the company’s uncertain outlook. Its stock initially rose on news of Westergren’s departure. Pandora is down 1.4 percent today, trading around where it closed Friday. Some analysts upgraded the stock on anticipation that the company would introduce more financial discipline.
“Lowering the burn rate may also lower subscriber growth forecasts,” Pacific Crest analyst Andy Hargreaves wrote in upgrading his rating on Pandora to Sector Weight. “But we would view this trade-off positively as it would reduce the odds of insolvency and extend Pandora’s time frame to try to find a sustainable model.”
Another scenario that is looking more likely is a sale of Pandora to another company — perhaps Liberty Media itself. In May, hedge fund Corvex Management bought a 9.9 percent stake in Pandora and began urging the company to explore a sale instead of pursuing “a costly and uncertain business plan.”
Only a year ago, Westergren insisted that company wasn’t for sale, saying he “got back in the saddle” to build Pandora’s long-term business. But as Westergren has noted more recently, he’s not writing Pandora’s next chapter anymore.
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